Paramount Energy Trust Advises on 2007 U.S. Income Tax Reporting



    TSX: PMT.UN, PMT.DB

    CALGARY, Feb. 28 /CNW/ - (TSX:PMT.UN) The following information is being
provided to assist U.S. individual unitholders of Paramount Energy Trust
("PET") in reporting distributions received from PET during 2007 on their
Internal Revenue Service ("IRS") Form 1040, "U.S. Individual Income Tax
Return" ("Form 1040").
    This summary is of a general nature only and is not intended to be legal
or tax advice to any particular holder or potential holder of PET trust units.
Holders or potential holders of PET trust units should consult their own legal
and tax advisors as to their particular tax consequences of holding PET trust
units.

    Qualified Dividends

    In consultation with its U.S. tax advisors, PET believes that its trust
units should be properly classified as equity in a corporation, rather than
debt, and that dividends paid to individual U.S. unitholders should be
"qualified dividends" for U.S. federal income tax purposes. As such, the
portion of the distributions paid in 2007 that are considered dividends for
U.S. federal income tax purposes should qualify for the reduced rate of tax
applicable to long-term capital gains. However, the individual taxpayer's
situation must be considered before making this determination.
    PET has not received an IRS letter ruling or a tax opinion from its tax
advisors on these matters.

    Trust Units Held Outside a Qualified Retirement Plan

    A return of capital for U.S. tax purposes is calculated differently than
for Canadian tax purposes. For U.S. tax purposes, a return of capital occurs
only after all the current and accumulated earnings and profits of a
corporation have been distributed. With respect to cash distributions paid in
2007 to U.S. individual unitholders, 19.11% percent should be reported as a
return of capital (to the extent of the unitholder's U.S. tax basis in their
respective units) and 80.89% percent should be reported as "qualified
dividends".
    For U.S. federal income tax purposes, in reporting a return of capital
with respect to distributions received, U.S. unitholders are required to
reduce the cost basis of their trust units by the total amount of
distributions received that represent a return of capital. This amount is
non-taxable if it is a return of cost base in the trust units. If the full
amount of the cost basis has been recovered, any further return of capital
distributions should be reported as capital gains.
    The portion of the distributions treated as "qualified dividends" should
be reported on Line 9b of Form 1040, unless the fact situation of the U.S.
individual unitholders determines otherwise. Commentary on page 19 of the Form
1040 Instruction Booklet for 2007 with respect to "qualified dividends"
provides examples of individual situations where the dividends would not be
"qualified dividends". Where, due to individual situations, the dividends are
not "qualified dividends", the amount should be reported on Schedule B - Part
II - Ordinary Dividends and Line 9a of Form 1040.
    U.S. unitholders are encouraged to utilize the Qualified Dividends and
Capital Gain Tax Worksheet of Form 1040 to determine the amount of tax that
may be otherwise applicable.
    The taxable portion (for Canadian income tax purposes) of the
distributions is subject to a minimum 15% Canadian withholding tax that is
withheld prior to any payments being distributed to unitholders. Beginning in
2005, the return of capital portion (for Canadian income tax purposes) of the
distributions is also subject to a 15% withholding tax that is withheld prior
to any payments being distributed to unitholders. Where trust units are held
in a cash account, we believe the full amount of all withholding tax should be
creditable, subject to numerous limitations, for U.S. tax purposes in the year
in which the withholding taxes are withheld. Where trust units are held in
qualified retirement account, the same withholding taxes apply but the amount
is not creditable for U.S. tax purposes.
    The amount of Canadian tax withheld should be reported on Form 1116,
"Foreign Tax Credit (Individual, Estate, or Trust)". Information regarding the
amount of Canadian tax withheld in 2007 should be determined from your own
records and is not available from PET. Amounts over withheld, if any, from
Canada should be claimed as a refund from the Canada Revenue Agency no later
than two years after the calendar year in which the payment was paid.
    Investors should report their dividend income and capital gain (if any),
and make adjustments to their tax basis in PET's units, in accordance with
this information and subject to advice from their tax advisors. U.S.
individual unitholders who hold their PET trust units through a stockbroker or
other intermediary should receive tax reporting information from their
stockbroker or other intermediary. We expect that the stockbroker or other
intermediary will issue a Form 1099-DIV, "Dividends and Distributions" or a
substitute form developed by the stockbroker or other intermediary. PET is not
required to furnish such unitholders with Form 1099-DIV. Information on the
Forms 1099-DIV issued by the brokers or other intermediaries may not
accurately reflect the information in this press release for a variety of
reasons. Investors should consult their brokers and tax advisors to ensure
that the information presented here is accurately reflected on their tax
returns. Brokers and/or intermediaries may or may not be required to issue
amended Forms 1099-DIV.

    Trust Units Held Within a Qualified Retirement Plan

    No amounts are required to be reported on a Form 1040 where PET trust
units are held within a qualified retirement plan.

    2007 Summary of U.S. Tax Information

    The following schedule summarizes, on a per trust unit basis, the U.S.
tax treatment of monthly cash distributions paid by PET (prior to Canadian
withholding tax) for the period January 1 to December 31, 2007. The amounts
are segregated between the portion of the distribution that would be reported
as a qualified dividend and the amount reported as a return of capital. The
amounts are expressed in $ U.S. converted on the date of payment.

    
                     2007 CASH DISTRIBUTION INFORMATION
                        FOR U.S. UNITHOLDERS ($/UNIT)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                        Tax-
                                                           Taxable  Deferred
                            Cash                    Cash Qualified Return of
    Record  Payment Distribution Conversion Distribution  Dividend   Capital
    Date    Date          ($ Cdn)   Rate (1)     ($ U.S.)  ($ U.S.)   ($U.S.)
    -------------------------------------------------------------------------
    Dec 29, Jan 15,
     2006      2007       0.2000     0.8561       0.1712     0.139     0.033
    Jan 31, Feb 15,
     2007     2007        0.2000     0.8592       0.1718     0.139     0.033
    Feb 28, Mar 15,
     2007     2007        0.1400     0.8505       0.1191     0.096     0.023
    Mar 30, April 16,
     2007     2007        0.1400     0.8842       0.1238     0.100     0.024
    April 30, May 15,
     2007     2007        0.1400     0.9110       0.1275     0.103     0.024
    May 31, June 15,
     2007     2007        0.1400     0.9364       0.1311     0.106     0.025
    June 29, July 16,
     2007     2007        0.1400     0.9588       0.1342     0.109     0.026
    July 31, Aug 15,
     2007     2007        0.1000     0.9306       0.0931     0.075     0.018
    Aug 31, Sept 17,
     2007     2007        0.1000     0.9701       0.0970     0.078     0.019
    Sept 28, Oct 15,
     2007     2007        0.1000     1.0248       0.1025     0.083     0.020
    Oct 31,  Nov 15,
     2007     2007        0.1000     1.0196       0.1020     0.082     0.019
    Nov 30,  Dec 17,
     2007     2007        0.1000     0.9928       0.0993     0.080     0.019
    -------------------------------------------------------------------------
    TOTAL 1.6000 1.4726 1.191 0.281
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Bank of Canada noon rate on date of payment
    

    Forward-looking Information

    Certain information regarding the tax treatment of distributions paid to
unitholders may constitute forward-looking statements under applicable
securities law and necessarily involve risks, including, without limitation,
risks associated with taxation authorities disagreeing with the conclusions
contained herein and changes in legislation or interpretations under
legislation, including but not limited to tax laws. As a consequence, actual
results may differ materially from those anticipated in the forward-looking
statements. Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on these and other factors that could
affect PET's operations or financial results are included in reports on file
with applicable securities regulatory authorities and may be accessed through
the SEDAR website (www.sedar.com), the SEC's website (www.sec.gov) or at PET's
website (www.paramountenergy.com).
    The forward-looking statements contained in this document speak only as
of the date of this document. Except as expressly required by applicable
securities laws, PET undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The forward-looking statements contained in this document
are expressly qualified by this cautionary statement.

    PET is a natural gas-focussed Canadian energy trust. PET's Trust Units
and convertible debentures are listed on the Toronto Stock Exchange under the
symbols PMT.UN, PMT. DB, PMT.DB.A, PMT.DB.B and PMT.DB.C. Further information
with respect to PET can be found at its website at www.paramountenergy.com.

    
    The Toronto Stock Exchange has neither approved nor disapproved the
    information contained herein.
    





For further information:

For further information: Paramount Energy Trust, Susan L. Riddell Rose,
President and Chief Executive Officer, (403) 269-4400; or Paramount Energy
Trust, Cameron R. Sebastian, Vice President, Finance and Chief Financial
Officer, (403) 269-4400; or Paramount Energy Trust, Sue M. Showers, Investor
Relations and Communications Advisor, (403) 269-4400, (403) 269-4444 (FAX); or
Paramount Energy Operating Corp, administrator of Paramount Energy Trust,
Suite 3200, 605 - 5 Avenue SW Calgary, Alberta, T2P 3H5, Email:
info@paramountenergy.com, Website: www.paramountenergy.com


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